Trio of South Korean carriers banned from taking on new customers for most of next month

Trio of South Korean carriers banned from taking on new customers for most of next month
The Korea Communications Commission does not like subsidized pricing on new smartphones.So when SK Telecom, LG U+ and KT offered subsidies on new handsets that exceeded 270,000 won ($252 USD), the commission members were ready to take action against the carriers. Starting January 7, LG U+ is banned from signing on new subscribers for 24 days. SK Telecom's ban will run for 22 days and KT's will last 20 days. Besides not being able to add new accounts, the three were fined various amounts by the KCC. SK Telecom will be shelling out 6.89 billion won ($6.42 million USD), while KT will be on the hook for 2.85 billion won ($2.654 million USD). The smallest fine, at 2.15 billion won ($2 million USD) is owed by LG U+.

Besides the new account ban and the fines, each of the three mobile operators has been given 1 month to submit a paper to the KCC detailing a new sales system that will go into place to make sure that the infractions never occur again. Between July and December of this year, the Korean Communications Commission watched as certain customers received the subsidies amounting to over the aforementioned 270,000 won. LG U+ was the carrier that offered subsidies the most out of the trio, followed by SK Telecom and then KT. All three were unhappy with the punishment as you might imagine.

Thankfully for those in the States, where most consumers are hooked on subsidized pricing, the FCC doesn't punish mobile operators' business decisions by banning them from taking in new accounts. You could imagine the uproar that would occur if the Feds tried to stop the carriers from offering subsidies in excess of $252 on new smartphones.

source: Telecompaper via UnwiredView



16. downphoenix

Posts: 3165; Member since: Jun 19, 2010

I wish our government would do the same here. The subsidies are nothing more than a loan. A carrier usually makes a minimum of twice the money back they "loan" you for the subsidy, if not more.

13. ilani

Posts: 90; Member since: Dec 23, 2011

Israel has an interesting law! phones are subsidized by carriers. BY LAW, everyone is entitled to a subsidized phone, but are not required to purchase phones from their carriers! you can import your own phone from anywhere in the world, buy online, whatever! and the Carrier by law has to credit you the purchase price of the phone. you can switch carriers, and your new carrier has to take over subsidization. i think this is better because there are no contracts, locking phones are illegal, thus companies are forced to compete with plans not phones! currently, for 99 Shekels (25 Dollars) a month gets you unlimited everything, voice, data, sms, aaaaaand unlimited long distance!!! Yup, unlimited long distance to anywhere in the world! for 59 shekels, the smaller carriers will give you unlimited everything excluding long distance!

14. gwuhua1984

Posts: 1237; Member since: Mar 06, 2012

Oh wow... that's a great deal!

11. rusticguy

Posts: 2828; Member since: Aug 11, 2012

There should be no subsidies on phones. Good it is not there in India and that's why avg billing is 1/10th of what it is in US under contract. Elimination of all sub sidies across the world on phonesw would show then who is the _REAL_ leader in market :)

9. gazmatic

Posts: 822; Member since: Sep 06, 2012

With subsidized phones the devil is in the details... Either you pay more in the long run opposed to buying outright or your device is limited, underpowered, locked, carrier branded or loaded with bloatware. Never mind the carrier's refusal to update your phone. If everybody had to pay full price for a phone, certain brands wouldn't survive. I doubt we would even have this two horse os battle.

10. fullmonty

Posts: 12; Member since: Nov 28, 2012

Buying outright shifts the burden on the manufacturers and not the carriers. Why do you think all devices are upgraded first in the rest of the world and then months later in the US? Heck, even the arrival of phones is delayed by 4-6 months compared to other countries. Right now, the three carriers are forced to pay Apple & other manufacturers nearly $400 for every device they sell. They make up the $400 by charging customers ridiculous amounts of money for data plans. According to some estimates 95% of the customers barely use 1GB of data and pay for the 5% of users who consume data like water. The carriers force data plans on all customers whether we like it or not. Nowhere in the world do companies force you to buy an expensive data plan if you bring your own device. Heck, most countries run on pre-paid SIM cards - only pay for what you use. Here, in the US its all about excess, pay a flat fee and eat-all-you-want. If subsidies end, monthly fees would be much lower.

12. gwuhua1984

Posts: 1237; Member since: Mar 06, 2012

If those brands could survive outside of US where there's no subsidies, then they could definitely survive in the US without subsidies. Manufacturers are raking in profits from the phones unless they're not selling enough of it, I don't think the cost to making a phone (even if it is a high end phone) will cost $600 while the phone itself is retailing for $800. When iPhone 4 was first released, there were people taking it apart and estimating the cost of making the phone to be around $200 to $300 and the phone is retailing in the Apple store for $600-$800 (I forgot how much exactly), not to mention when the phone was selling for $299 from AT&T, the customer still have to pay for the rest of the phone via their data plans. By removing subsidies, it'll only benefit the consumer more because the manufacturers will battle it out not just on the spec of the device but also the price of the device. It'll be a plus on both carrier and manufacturer pricing for the consumers. Probably won't effect people wanting to get Apple device tho, cause Apple won't go into price wars with other manufacturers but it will benefit those who wants to get an Android device.

5. fullmonty

Posts: 12; Member since: Nov 28, 2012

That's what we need here in the US; get rid of subsidies and compete on services. Better for the consumer; it would bring down the prices. Plus carriers would be able to say F#@% Y()# to Apple. Right now Apple demands full pricing from carriers. If subsidies were gone, and it cost $600 to upgrade, only half as many customers would upgrade to the shiny new igadget every year.

8. lauremar

Posts: 181; Member since: Feb 29, 2012

I totally agree with this sentiment!

1. a961009

Posts: 120; Member since: Aug 04, 2011

As I am Korean, this is really crazy. The gov. doesn't want people to buy cheap phones...

2. tiara6918

Posts: 2263; Member since: Apr 26, 2012

Why?Is that why most of the phones are running 4G LTE?

3. a961009

Posts: 120; Member since: Aug 04, 2011

Actually that is because demand of the 4G LTE phones are very high. Of course many people want 4G LTE phones to have high speed of internet connection, but most of the people want just because 4G LTE is more advanced technology than 3G. So people think that 3G phones are old-fashioned phones. That's why in korea manufacturer only release high spec phones. Do you know why Htc and Motorola decided to close their business in Korea? It is because these manufacturer cannot follow what people want. To be successful in Korea, they must release flagship phone at least every 6month. However for manufacturers, making "only korean market"phones are expensive and since the market is small, they don't think that it is profitable to make it. Moreover in Korea people tends to think that "Galaxy"phones are the best in the world. Although Lg and Pantech releases better phone that samsung phones, people don't buy it. This also goes to Htc Motorola and Sony.

15. tiara6918

Posts: 2263; Member since: Apr 26, 2012

Thanks for the info, no wonder samsung still released a galaxy s2hd lte/lte

4. a961009

Posts: 120; Member since: Aug 04, 2011

And I forgot to say this.... People in korea thinks that 1gig of ram, Dual/Single core(s), WVGA and QHD displays, and less than 4.7 inch screens phones are low cost or old fashioned phone..... This is real problem. Anyway sorry 4 my bad English :)

6. gwuhua1984

Posts: 1237; Member since: Mar 06, 2012

That's very interesting to know.

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